Cost-Plus Contract

An agreement to pay a company for a job based on the amount of money used to buy the materials required to complete that job plus an added payment. A cost-plus contract fully reimburses a contractor for the cost of materials and then adds additional money to arrive at the total cost of the job. Cost-plus contracts are commonly used in research and development activities, where it is difficult to determine in advance how much a job should cost. For example, the U.S. government has agreed to cost-plus contracts with military defense companies that are developing new technologies for national defense.

Cost overruns are a major concern with cost-plus contracts, since all costs are reimbursed and the additional fee may already be known in advance. However, this problem can be mitigated or avoided if the contract is structured properly. For example, the contract can offer an incentive fee for saving money on materials, or the contract can limit the amount of money that can be spent on materials.


Investment dictionary. . 2012.

Look at other dictionaries:

  • cost-plus contract — n. A kind of contract, common in construction projects, in which the contractor is paid for costs of material and labor plus a percentage of those costs as profit. The Essential Law Dictionary. Sphinx Publishing, An imprint of Sourcebooks, Inc.… …   Law dictionary

  • Cost-plus contract — A cost plus contract, also termed a Cost Reimbursement Contract, is a contract where a contractor is paid for all of its allowed expenses to a set limit plus additional payment to allow for a profit.[1] Cost reimbursement contracts contrast with… …   Wikipedia

  • cost-plus contract — išlaidomis pagrįsta sutartis statusas T sritis Gynyba apibrėžtis Sutartis, kurioje numatyta rangovui kompensuoti leidžiamąsias ar kitokiu būdu nustatytas išlaidas kartu pridedant tam tikrą procentą nuo jų arba sumokant sutartą mokestį.… …   Lithuanian dictionary (lietuvių žodynas)

  • cost-plus contract —  Contract with payment based on costs plus a fee.  ► “Airplane manufacturers increasingly ask suppliers to fund development costs from overhead, although there is a powerful trend in the commercial aircraft industry ranging from cost plus… …   American business jargon

  • cost-plus contract — A contract entered into by a supplier in which the goods or services provided to the customer are charged at cost plus an agreed percentage markup. This method of pricing is very common if the cost of producing the commodity is unknown or if its… …   Accounting dictionary

  • cost-plus contract — A contract entered into by a supplier in which the goods or services provided to the customer are charged at cost plus an agreed percentage markup. This method of pricing is very common if the cost of producing the commodity is unknown or if its… …   Big dictionary of business and management

  • cost-plus contract — noun a contract in which the contractor is paid his total cost plus a stated percentage of profit • Hypernyms: ↑contract …   Useful english dictionary

  • cost-plus contract — A contract in which the selling price is based on the total cost of production plus a fixed percentage or fixed amount. Bloomberg Financial Dictionary …   Financial and business terms

  • cost plus contract — A building or construction contract under which the contractor is entitled to recover the cost of the work to him plus an agreed upon percentage. 13 Am J2d Bldg Contr § 20 …   Ballentine's law dictionary

  • cost-plus contract — One which fixes the amount to be paid the contractor on a basis, generally, of the cost of the material and labor, plus an agreed percentage thereof as profits. Such contracts are used when costs of production or construction are unknown or… …   Black's law dictionary

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”

We are using cookies for the best presentation of our site. Continuing to use this site, you agree with this.